When conservatives rail in the media of the dangers of "returning to Smoot-Hawley, which created the Great Depression", all they do is reveal their ignorance of economics and history. ... Smoot-Hawley "protectionist" legislation did not cause the Great Depression, and while it may have had a slight short-term negative effect on the economy ("1.4 percent at most" according to many historians) its long-term effect was to bring American jobs back to America ~ Liberal Talk Radio host Thom Hartmann, 3/12/2994.
Alternate Post Title: On How Smoot-Hawley's Effect on the Great Depression was Negligible.
According to Conservatives, the protectionist legislation signed by president Herbert Hoover contributed greatly to making the Great Depression that much worse. The proprietors of Conservative blogs like Contra O'Reilly author literally dozens of posts claiming that Depression-era protectionist trade legislation negatively impacted the economy. In his latest post on the topic the Conservative blogger said...
| Willis Hart: ...after the 1929 stock market crash, unemployment never reached double digits in any of the 12 months following that event, peaking at 9 percent, then drifting back downwards until it reached 6.3 percent in June 1930. It wasn't until Smoot-Hawley was passed that the unemployment rate started to skyrocket (12/14/2011 AT 7:13pm). |
But according to Thom Hartmann...
| The Smoot-Hawley tariff legislation, which increased taxes on some imported goods by a third to two-thirds to protect American industries, was signed into law on June 17, 1930, well into the Great Depression. In the following two years, international trade dropped from 6 percent of GNP to roughly 2 percent of GNP (between 1930 and 1932), but most of that was the result of the depression going worldwide, not Smoot-Hawley. The main result of Smoot-Hawley was that American businesses now had strong financial incentives to do business with other American companies, rather than bring in products made with cheaper foreign labor: Americans started trading with other Americans. |
In other words, the depression and unemployment did get worse, but it had absolutely nothing to do with Smoot-Hawley, which was, in fact, a good thing. Because it encouraged American job growth. All one has to do is examine the actual data to see what utter baloney blaming Smoot Hawley for the Great Depression is.
As pointed out by a member of the Thom Hartmann message board, the official government figures from the US Bureau of Economic Analysis prove that "there is practically NO evidence that Smoot-Hawley hurt our economy".
The negative impact that Smoot-Hawley had on our economy (if any) was negligible, because as the author of "The Smoot-Hawley Fairy Tale" points out...
| The US was already in a Depression when Smoot-Hawley was enacted. Prior to Smoot-Hawley, the 1929 Trade Surplus was +0.38% of our GDP. In other words, it contributed less than 1/200th to our economy. |
During the Great Depression GDP declined 46 percent. Of that, the net trade loss (exports less imports) accounted for a total GDP loss of less than 1/2 of 1% ($0.2 billion). Does this sound like an amount that would cause, according to the Conservative blogger Will Hart, the unemployment rate to "skyrocket"? It's actually quite laughable.
The Conservative blogger points out that economists "from across the political spectrum" were against the passage of Smoot-Hawley, so that proves [1] that Smoot-Hawley did make the Depression worse, and [2] Smoot-Hawley making the Depression considerably worse isn't a "Conservative myth". In response I say [1] As the data shows the economists were clearly wrong, and [2] Smoot-Hawley making the depression worse is only a myth NOW - decades later. Of course Smoot-Hawley making the depression worse wasn't a myth BEFORE Herbert Hoover signed it! The amazing thing is that this guy doesn't even realize how dumb his argument is.
So, in conclusion, was Smoot-Hawley bad for the US economy? No, "protectionist" trade legislation is a GOOD thing. Smoot-Hawley may have had a minor negative impact, but that was because it takes time for manufacturers to ramp up production of goods in the US (using US labor). In the long run "protectionist" trade policies grow the US economy by encouraging manufacturers to create good paying jobs for US citizens. We need more of this kind of legislation.
YouTube Video Synopsis: Prominent economist Ha-Joon Chang is tearing a giant hole in the fabric of the free traders' universe by taking on the conventional wisdom that protectionism is detrimental to economies and the belief that the Smoot-Hawley Tariff Act was responsible for deepening and prolonging the Great Depression.
